Sunday 26 September 2010 19.05 EDT
First published on Sunday 26 September 2010 19.05 EDT

Here is a puzzle: the Conservatives and the Liberal Democrats fought the last election promising greater power for local town halls. More than manifesto-speak, it is an objective both parties appear genuinely to believe in. So why is the coalition blocking a direct route to that promised land – reform of the council tax system?

In briefings and interviews over the past few days, Eric Pickles, effectively the cabinet minister for localism, has set his face against revising the council tax bands. He claims that it would penalise the poorest. And, as he told the Today programme on Friday: "Just coming out of a recession I don't … think we should be imposing an extra £1,600 worth of taxation on them [ordinary families]."

Mr Pickles is a clever man and a canny political operator; in making these arguments, one can only assume that the latter is speaking. Because both points are nonsense. There is no fundamental reason why a revision of the council tax system should cost households a penny more, if ministers so wished. Or if fairness is the government's concern (which would make a pleasant change after George Osborne's regressive budget), then the system could be altered so that mansion-dwellers paid more. Neither possibility is academic; indeed, methods to achieve the latter were laid out in a Treasury review of local government finance published in 2007.

One conclusion of that review, authored by former local authority boss Sir Michael Lyons, was that the council tax system needs wholesale revision. Which it does. The current bands are largely based on housing values collected in 1991. Consider how ludicrous it would be if income tax rates were set according to the pay one received two decades ago. And the average wage has not been through the sort of booms and busts familiar in the housing market.

Besides which, John Major's council tax is not terribly fair. A giant pile worth 20 times more than a two-up-two-down is subject to only three times as much council tax. As the Lyons report argued, the system needs new bands at both the top and the bottom to spread the burden more evenly. What deters politicians, whether Tory or Labour, from fixing such a creaky arrangement is the prospect of upsetting voters. For many people, council tax is the only tax bill that nosedives on to their doormats, rather than being silently added to the wage slip or till receipt. It is therefore much more noticeable.

Yet by ducking out of revising council tax and the system of local government finance, the coalition is preaching localism when it comes to council cost-cutting, but centralism on money-raising. Were Labour to adopt such a policy, the plain-speaking Mr Pickles might describe it as hypocrisy.